Examination of Witness (Questions 40 -
59)
WEDNESDAY 16 JANUARY 2002
ASSISTANT CHIEF
CONSTABLE RAYMOND
WHITE OBE
40. On £3,000 or £4,000 a year.
(Mr White) Exactly, but our problem, again, is if
there is not an investigative trigger there, in other words I
have no hook on which to investigate that individual, I may suspect
and I may know to some degree where some of his assets have come
from, but the inability is there at this moment in time within
the law to bring that person in for living a quality lifestyle,
unless I can associate that directly with an aspect of criminality
that he has been engaged in.
Chairman
41. If you say the inability of the law is holding
you back, what change would help you?
(Mr White) That change is coming with the Proceeds
of Crime Act whereby the Criminal Assets Bureau will allow us
for the first time to start to look at people whose overt income
does not support the lifestyles that are there. It is a reverse
burden of proof in a sense.
42. Do you think that will make a large difference?
(Mr White) Again depending on the courts' approach
to it. The courts have an attitude of mind which quite often frustrates
those kind of things, especially when it comes to reverse burdens.
The EU courts have not looked favourably in the past on law which
places the onus on the individual to prove his innocence as opposed
to us proving his guilt.
Mr Beggs
43. There are indications that there is increased
criminal sophistication in areas such as fuel laundering, electronic
tampering with gaming machines, business fraud, counterfeit notes
and documents. How far is this the case for paramilitary groups,
and what are the implications for the Government's response?
(Mr White) I think again I take you back, Mr Beggs,
to what I said before, that each particular criminal enterprise
needs to be studied in tremendous detail because each enterprise
requires its own specific response. It is not a case in terms
of the law of one suit fits all. I think you have to tailor the
law to deal with the particular enterprise that you are examining.
That is what we are basically engaged in at the moment in respect
of each aspect. It is an incremental issue. Having started out,
if you take the case of fuel laundering, providing what you call
laundered fuel to existing retail outlets, it is a very short
step to purchasing the outlet itself with the proceeds of the
profits that are there. In that incremental way you can buy yourself
in. Currently we are looking at fuel laundering having moved substantively
to the mainland here. We are looking at one Scottish council which
has through, shall we say, cost-saving desires engaged, as it
were, in purchasing fuel which was coming to it at two or three
pence a litre cheaper. The fuel was arriving in tankers that were
unmarked and was arriving in the late hours of the night and the
early hours of the morning. It was saving them money but when
they looked a little deeper they became a wee bit worried. But
by that stage something in excess of a quarter of million pounds
had been paid to a certain company in Donegal. Needless to say,
the contract has been cancelled. I am using it as being illustrative
of the fact that the confidence is there amongst the fuel laundering
people to enter into long-term contracts of supply, so it shows
you the step-by-step process that these people are prepared to
undertake, moving simply from one tanker of illegal fuel now and
again, through to the business of the retail outlet, and now into
what you would call wholesale supply, which is indicative of the
entrepreneurialship that is there amongst the paramilitaries,
amongst the organised criminals. If given the opportunity they
will certainly take it to its limits and those are the issues,
in essence, that we are up against. Each aspect of the criminal
enterprises that are engaged in would be well worthy of detailed
examination, simply to make sure that at the end of it the investigative
opportunities are right, and that the right lead agencies are
there with the right capacity to take those investigations through
and, above all, that the right legislation is in place to enable
us to tackle it because not all of it can be tackled successfully
through the criminal law. Quite often the financial law that the
Inland Revenue and others have is a much more powerful stick than
that which the Police Service or anybody else can bring to bear.
44. Which of the paramilitary groups do you
consider to be the most sophisticated in these elements?
(Mr White) I think that the sophistication runs through
them all. If you look at different activities, for the Loyalist
paramilitaries you could point to counterfeit CDs and Playstation
games. They have invested in the setting up of pirate factories
in that sense. They are all fairly well sophisticated in relation
to cigarette smuggling. Long gone is the white van and now you
are seeing shiploads of the stuff brought in in cords of timber,
where purposely within the cord of the timber there is constructed
a concealment. That does not get itself done in a back shed somewhere,
that smacks of a factory operation and, as I say, with all the
knowledge of shipping and everything else being there to bring
it through. If you look at the fuel smuggling, again it is not
being brought over just in one or two simple plastic containers,
it is in taut liners with 13,000 litre tanks put into the back
of them and shipped on through. Sophistication is increasing in
terms of the means of concealment and in the volume of supply
with counterfeit goods, clearly in relation to the markets, you
are looking at a substantive turnover there. All paramilitary
groups are engaged in that, the articles being purchased in and
around Leicester and being brought back to the province. We have
good working partnerships there with the Counterfeit Products
Agency and others who can work with us and identify the goods.
So I would not point to any one organisation being exclusive in
itself. You only have to look at the RIRA bottling plants in relation
to illegal alcohol or to some of the fuel laundering plants that
are there in terms of the volume of turnover, to see that once
they get a taste for the money how that gets itself reinvested
and how they can carry it all through to a profitable outcome.
Mr Bellingham
45. Can we look again at gaming/gambling, Mr
White. What, in your view, are the problems faced by law enforcement
officers in dealing with gaming/gambling and possibly lottery
frauds as well?
(Mr White) We do not have any casinos, thankfully
we are not into that level of gaming and gambling. The revenue
turnover to Her Majesty's Government in relation to the gaming
and lottery system is £2.5 million a year and the betting
trade in relation to horses and dogs is fairly well-regulated.
Our weak spot, I suspect, is in relation to lotteries, and lotteries
are viewed certainly by the PIRA as means of funding the local
brigades. They are very difficult to detect in that they happen
in-house within the pubs and clubs that are theirs. They may produce
small sums of money on the face of it, it may be £100 or
£200, but it is the volume in which they are done that produces
the lump sum at the end of it. We do run a clubs unit where we
still very much inspect the books of clubs and we make sure that
club legislation is fairly well enforced, but you will appreciate
that in terms of a lottery or ballot, unless you are in the premises
at the time, there is very little left in the way of evidence
and they are not the sort of pubs and clubs where I could too
easily despatch police officers to spend the evening. So detection
is a difficulty for us in that respect but it is a reasonably
lucrative turnover in respect of the paramilitary groups.
46. You would say it is quite significant? Just
one very quick question. You mentioned earlier about lifestyles
and the overt income that potential terrorists and former terrorists
or people who might be connected with terrorism have, and obviously
until the Proceeds of Crime Bill becomes an Act and is implemented
you can in the meantime do a certain amount of work with Customs
& Excise and other bodies. What you cannot do at the moment
is demand to see people's bank accounts without due suspicion
(and someone living well above their means does not rank as due
suspicion), but you can work with other agencies. Can you point
out the work you do with other agencies?
(Mr White) The whole approach we have adopted is predicated
on a multi-agency approach. I have provided the Committee with
some evidence on that. We play to the strongest investigative
line. With HM Treasury and Inland Revenue we can only exchange
information in the sense we give it and they choose to act upon
it or not. There is not a two-way flow. There are attempts being
made to create gateways for information exchange. We do work very
closely with HM Customs & Excise and we would follow up any
investigation and by bringing the VAT side on board in terms of
each investigation to work with our own financial investigators.
So where we can, we certainly seek to take the financial issue
to the individual, but again it has to be triggered by some criminal
offence so that one or other of the agencies has the capacity
to investigate. Again, it is a balance of resources. I have a
finite number of detectives and they have to be spread across
a fairly broad spectrum of criminal activity, and it has to be
within that capacity. That said and done, HM Customs & Excise
has enlarged its input in the Province from 25 officers to something
in excess of 167 officers, so the manpower investment has been
made there.
47. Over what period?
(Mr White) Over a period of 12 months.
48. 12 months?
(Mr White) There has been a substantive input there
in recognition that, primarily, the fuel laundering aspect was
something that needed to tackled head on, so the investment has
been made where we can evidence the criminal enterprise warranting
it.
Mr Bellingham: Thank you.
Mr McCabe
49. Mr White, let me try and ask you about a
totally different sort of market. Can I just check if it is the
case, as the Crime Task Force has said, that money laundering
poses the most immediate threat to society in Northern Ireland,
and if we are talking about significant sums of money, why do
you think there have only been two major investigations in recent
years and neither of those involved paramilitary organisations?
(Mr White) You will not see us prosecuting any individual
with a PIRA pedigree or an INLA pedigree or a RIRA pedigree, if
the only capacity I have is to prosecute those that actually handle
and deal with the money. We know where some of the monies have
their origins and who it belongs to, but if there is no evidential
chain I can produce for the court that will clearly demonstrate
that it is PIRA money or money lodged by any given PIRA member.
I cannot highlight the organisation.
50. It does say in your brief that there is
no suggestion that either of them would have benefited any paramilitary
organisation, so I presume these were investigations that were
directed at more conventional crime. If it is such a major threat,
why do you think there have been only two and you did not focus
on the paramilitary side of it?
(Mr White) Again, we go where the evidential leads
take us, and certainly money laundering has come to the fore simply
because of the turnover there is in terms of money from organised
crime. It is well recognised internationally and nationally that
money laundering is a tremendously difficult issue to investigate
and the Americans have spent something like 30 years developing
R.I.C.O. And when they actually got to RICO it allowed them to
tackle what you would call the financial infrastructures of organised
crime. We are trying to get there in a much shorter period of
time. I am not altogether sure that the complete body of law is
there yet. In fact, getting the courts to recognise what you would
call an organised crime infrastructure is difficult in itself
because the law, by and large, only recognises individual criminal
acts. In that sense, trying to present issues as being of benefit
to an illegal corporate body is a fairly substantive step in terms
of the criminal law. We are getting there. It is going to take
some time to put the criminal investigative structure there. But
before you can mount any investigation it has to be backed by
intelligence. It is getting that depth of knowledge that allows
you to mount an investigation. We are still very much focused
on the intelligence stage. I would not come before the Committee
and hold out any great hope that money laundering investigations
will leap to the fore, but they are very much there in terms of
an output to be achieved.
51. Could you tell the Committee something about
the kind of money laundering activities you believe the paramilitaries
are engaged in? Can you give us some idea of the kind of things
you are concerned about?
(Mr White) It is not a matter of just taking the illegal
proceeds of one particular operation. With the money raised in
terms of the fuel smuggling, they cannot very well walk down the
road and lodge it in an interest-bearing account, so it gets itself
rolled over into perhaps cigarette purchases the next time, or
it will get itself invested in property purchase. The PIRA at
the moment run a fairly substantive fleet of vehicles which are
given out to their members. In that sense, monies get turned over
and poured into legitimate businesses. Certain pubs and clubs
that come up for sale will get themselves purchased. You do not
see the money passing through the financial institutions. It will
pass through in the purchase of a property into which some clean
individual will be put, so it is that churning that goes on. Obviously
where they need to come up with fixed sums of money, they can
draw that down having made the deposit with certain businesses.
If they need it for arms purchases or anything else, that money
can be very quickly found and taken in that sense. Or it can be
cleaned in the sense that it can be put through a bureau de change,
moved on to another country and then brought back on false invoices.
The last case we uncovered involved Coca Cola. There was an awful
lot of Coke being drunk in certain areas which never moved in
the form of bottles but the invoices came through. In that sense,
for anybody auditing the books it looks as if it is money legitimately
received for services rendered. They will do that through setting
up bogus companies and then perhaps letting that company go bust
and move on and set up another one. There is a whole variety of
scams. It is like everything else, we are very much on a learning
curve.
52. Have you any idea how much we might be talking
about or is that just impossible to say?
(Mr White) I would hesitate at putting a figure on
it other than to say it is certainly multi million. You can start
to build a picture by taking individual criminal enterprises and
looking for the amount of money that is turned over in those,
but I am not so much concerned about the actual figure or the
exercise of producing the figure because I think there is sufficient
evidence there to show that it is of the level where in Northern
Ireland terms, we need to be extremely worried.
Chairman
53. Is the introduction of the euro in the Republic
going to make this money laundering easier or more complicated?
(Mr White) I would hesitate to say it would make it
easier, it simply means that those punts that are buried need
to be dug out fairly soon and put through the banks and converted
into euro. You might see a rise in the money laundering aspect
fairly quickly. The main concern at this moment in time is on
the counterfeit side. We had our first counterfeit euro coin.
You might say who would want to counterfeit a euro coin, and yet
it appeared in Castleblaney over the weekend, and the first of
the counterfeit bank notes have appeared in Dublin, so counterfeiting
is alive and well in respect of the euro. The euro is initially
the area we will suffer from as the unfamiliarity with the euro
note will probably catch out businesses. We are engaged in an
education process at this moment in time through the banks so
that the business community gets a degree of education, certainly
those businesses that operate along the border, so the detection
of counterfeit notes will be there. I would hesitate to say what
the euro itself will mean for crime investigation for the future,
but I have no doubt they will find some means of benefiting from
it.
54. I gather interest free loans are available
in punts to be repaid in euros or sterling?
(Mr White) Yes, indeed.
Mr Bailey
55. Just following on from one of the points
made by my colleague on money laundering. * * * . How do they
manage to hide that * * *?
(Mr White) * * * investigations are underway, but
I was simply using it as illustrative of where some of the profits
get themselves used and expended. The same thing applies in relation
to mobile phones. There is a major industry in the purchase and
disposal of mobile phones in terms of operational planners with
their own clientele, again on the basis that the interception
of communication is an industry in which HM Government engages,
and if you do not want to be too easily overheard you simply use
your phone today and throw it away tomorrow and collect another
one and that changes your number fairly quickly. There is a rapid
turnover in mobile phones and if the price is going up to £100,
if you go by the papers, and that will increase their expenditure
in that area.
56. That is an interesting beneficial by-product.
Can I move on to an entirely different subject, social security
fraud. I believe this is supposed to be considerable. What sort
of percentage is paramilitary provoked or initiated?
(Mr White) I would hesitate to say what percentage
is there. The abuse, shall we say, comes in the sense that individuals
are found employment in the building trade and encouraged at the
same time to claim their unemployment benefit and would be tutored
and educated in that sense, so there is an element of ghost workers
there. There is an element of insurance fraud, there is an element
connected with the exemption certificates which are there in relation
to the building trade, where income tax and things do not have
to be paid for six months afterwards, by which time the company
disappears. Those individuals are encouraged to work perhaps for
less than the going rate within the building trade but augment
their income by registering for unemployment and being facilitated
to do so. Perhaps it is indirect activity. It is not an area of
investigation that we would take ownership of, but we would work
with investigators through the DSS to identify those issues. It
is an area which has been fairly well trawled by the Northern
Ireland Audit Office. I think the figures are there to show the
degree of leakage or abuse that is there. There is abuse there
in relation to prescription fraud and things of that nature. It
is back to what I said earlier to the Chairman, there is an attitude
of mind in the Province that if you can defraud the Government
it is not of a criminal nature. You may well know that it is said
that 98 per cent of the Northern Ireland population appear to
claim an entitlement to exemption from prescription charges and
I do not think that sits too comfortably with the income of its
people, it should not be that high. It is indicative of an attitude
of mind that if you can strip money off the Government in any
sort of way you are not doing anything of which you should be
ashamed, and the paramilitaries will provide advice, quite often,
as to how that can be done, and they will assist and condone ghost
workers, things of that nature.
57. Northern Ireland does not just have benefits
advisers, it has benefit fraud advisers as well.
(Mr White) Exactly. It is a culture that needs to
be attacked and it is above and beyond anything the Police Service
can do. It is an issue for Government as to how you turn out a
more honest society. To do that you have got to point out to them
that they are denying themselves hospitals and other facilities
that the legitimate paying of taxes would produce.
Mr Robinson
58. I have to say I am not convinced that some
of the people who benefit from the proceeds of fraud are going
to be greatly convinced as to the fact they can get hospitals
and schools and new roads as a result of it because their altruistic
tendencies are not their most commonly known asset. Can I ask
you to look in a bit more detail at the issue of counterfeiting
and forgery. In the document we have before us it shows a fairly
formidable activity on the part of the police in relation to CDs,
Playstation games, videos, clothing and software. In a year or
thereabouts from 1 January 2001 police seized about £2.6
million of goods. By its nature, this probably is a more visible
form of their activity. Does that mean that that is a large part
of the money that they would be getting from that source or how
much of the iceberg is below the water, do you think, in this
case?
(Mr White) Those agencies which are dealing in terms
of counterfeit goods and those who look for counterfeit clothing
and CDs—the theft of intelligence or property theft or knowledge
theft in the sense of the CDs and Microsoft systems that find
themselves copied—say that it is extremely extensive. I
would say the Police Service for Northern Ireland, to some degree,
is unique in the sense that we are the only Police Service that
tackles in any structured way this whole area and we are doing
it simply because of the funding and monies that flow toward the
paramilitaries. You can see it most evidently in terms of the
markets as being the outlet but that is not where the profitability
lies. Quite often it lies at the manufacturing or wholesaling
end, and we have clear indications that one individual purchase
was for one million blank CDs, which is fairly indicative of the
turnover.
59. He is obviously a music lover!
(Mr White) He is certainly sitting up all night listening,
if that is the case. That is the visible end of it. We go at it
in terms of the market, not only to try to highlight to the people
that are buying these goods the fraudulent nature of the goods
themselves, but also to try and get ourselves some evidential
leads that take us back into the manufacturing sector again. It
has been a qualified success in that we have turned over a number
of music production and video production factories both this side
of the border and across in Dundalk and elsewhere. Again, we are
only touching, I would say, the surface of it. Some of the markets
are hard to get at. It takes a substantive degree of organisation
to get the military police and all the resources together to go
and touch those markets. Again, I think it would be fair to say
that we are still scratching the surface of what is a fairly lucrative
business.
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